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BoG to test blockchain-based financial product for use in the country

Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has disclosed that the Central Bank is currently working on testing a blockchain-based product within its innovative SandBox Pilot programme.

“The Bank is currently working on testing a block chain-based product and 2 innovations in the remittance space. From our engagement with this first cohort, several lessons have been learnt which will inform an enhancement of the BoG sandbox experience and provide more opportunity for other innovative products,” noted the Governor.

Dr Addison made the disclosure at the 10th edition of the Business and Financial Times Ghana Economic Forum (GEF) on Monday, October 18, 2021.

Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.

The SandBox Pilot programme provides a supportive and controlled policy environment that enables firms particularly FinTechs to test innovative products, services and business models under the supervision of a regulator, to assess the usefulness, viability and safety of innovations in the financial services industry.

The sandbox, according to the BoG Governor, is available to banks, specialised deposit-taking institutions (SDIs) and payment service providers including dedicated electronic money issuers as well as unregulated entities and persons that have innovations that meet the sandbox requirements.

He spoke on the theme ‘Strengthening Home-grown Policies to Underpin the National Digitisation drive and Shared Financial Prosperity.

The Governor highlighted the establishment of the FinTech and Innovation Office at the Bank of Ghana, the Financial Industry Command Security Operations Centre (FICSOC), and the adoption of an integrated Risk-based Supervisory Approach for digital financial services to focus on functional areas of operation and systemic risks.

He added that these and others were measures and initiatives introduced by the Central Bank to advance financial digitisation in the economy and the government’s national digitisation agenda.

“Aside the progress made in financial digitisation in the economy, the widespread use of technology has also heightened risks in the financial services sector, evidenced by incidences of cyber-attacks, mobile money, and ATM fraud. This calls for tighter regulatory frameworks to ensure the integrity of the digital financial services ecosystem.

In addition to the Cybersecurity Act, 2020 (Act 1038) and the Data Protection Act, 2012 (Act 843, the Bank has established a Financial Industry Command Security Operations Centre (FICSOC) to provide broader perspectives on cyber threats confronting the sector through constant monitoring and intelligence sharing.

“Overall, the Bank has adopted; an integrated Risk-based Supervisory Approach for digital financial services to focus on functional areas of operation and systemic risks. This includes a holistic review process involving prudential, market conduct, financial integrity, and payment systems risk perspectives for products, services, and technology outsourcing arrangements proposed by banks and non-banks or FinTechs.

“In addition, the Bank has adopted the use of technology to improve regulatory compliance and supervision and upgraded its supervisory technology (SUPTECH), introduced in 2018, to automate data collection and analytics on a disaggregated basis for electronic money issuers.

The SUPTECH is now augmented under the artificial intelligence-powered Online Regulatory and Analytics Surveillance System (ORASS) to cover all banks and other licensed financial services providers under the Bank’s regulatory perimeter.

This is critical for supervisors in identifying trends and early warning signs for early supervisory interventions when necessary,” remarked the Governor.

READ ALSO: BoG Launches Sandbox Pilot Programme To Promote FinTechs

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